This UPDATED post summarizes the situation as of late evening on Friday, February 25, concerning current U.S. sanctions and export restrictions related to Russia and Ukraine. This post supplements our post of late evening on Wednesday, February 23, which is available here, and our post of late evening on Thursday, February 24, which is available here.

As of late evening on Friday, February 25, the U.S. government announced that it is imposing sanctions on Russian President Vladimir Putin and Foreign Minister Sergey Lavrov along with two other senior Russian government officials.  Each of these individuals has been designated as a Specially Designated National (SDN).  Correspondingly, U.S. individuals and entities are prohibited from conducting any business with these designated parties, whether directly or indirectly.

The European Union had previously imposed sanctions on President Putin.

The United States Extends Existing Sanctions Related to Belarus, Targets Support for Russia

In addition, on February 24, the U.S. Office of Foreign Assets Control (OFAC) announced that it was designating 24 Belarusian individuals and entities as SDNs.  According to OFAC, these sanctions limit these SDNs from supporting Russia and further limit these SDNs in transactions with the U.S. and other international commercial actors.

As a result of these designations, U.S. entities and individuals are prohibited from conducting virtually any transaction, whether directly or indirectly, with the designated parties.  These recent actions build upon prior sanctions OFAC has imposed on Belarus, particularly the administration and other parties related to Belarusian President Victor Lukashenka.

The designations target entities and individuals in the Belarusian defense and financial sectors, as follows:

• Belarussian Bank of Development and Reconstruction Belinvestbank Joint Stock Company and two related companies.
• Bank Dabrabyt Joint-Stock Company (Bank Dabrabyt).
• Minsk Wheeled Tractor Plant (MWTP),a Belarusian state-owned enterprise (SOE) that, according to OFAC, is the “flagship of Belarusian military-industrial complex.”  OFAC notes that EU previously sanctioned this entity.  Sanctions were also imposed on two senior executives of MWTP.
• State Authority for Military Industry of the Republic of Belarus, and this entity’s chairman and deputy chairman.
• State-Owned Foreign Trade Unitary Enterprise Belspetsvneshtechnika.
• OJSC KB Radar-Managing Company Holding Radar System (KB Radar).
• JSC 558 Aircraft Repair Plant. 
• Public Joint Stock Company Integral. 
• Industrial-Commercial Private Unitary Enterprise Minotor-Service. 
• OOO Oboronnye Initsiativy.
• OKB TSP Scientific Production Limited Liability Company. 
• LLC Synesis, and LLC 24×7 Panoptes, a former Synesis subsidiary, and Aliaksandr Yauhenavich Shatrou, the owner and CEO of Synesis.

In addition, OFAC designated Viktor Gennadievich Khrenin, the Belarusian Minister of Defense, and Aleksandr Grigorievich Volfovich, the State Secretary of the Security Council of Belarus, as SDNs.  OFAC has also designated as an SDN Aliaksandr Mikalaevich Zaitsau, who reportedly maintains close ties to the Lukashenka family.

U.S. Commerce Department Announces Sweeping Restrictions on Exports to Russia

On February 24, the U.S. Commerce Department, Bureau of Industry and Security (BIS) announced the imposition of substantial licensing requirements on exports, re-exports, and in-country transfers to Russia of commercial – or so-called “dual use” – goods, software, and technology.  BIS is apparently targeting Russia’s defense, aerospace, and maritime sectors and seeking to cut off Russia’s access to vital technology that supports the Russian government and military.

In particular, BIS took the following actions:

• Imposed licensing requirements on most entries on the Commerce Control List (CCL), i.e., most items not covered under the catch-all EAR99 classification.
• Announced a policy of denial on export applications to Russia while limiting the use of license exceptions.
• Expanded the Foreign Direct Product (FDP) rule to restrict Russia’s ability to acquire items made outside the United States using U.S. technology or software.
• Transferred Russian entities from the Military End User (MEU) List to the Entity List (EL), which imposes more restrictive licensing requirements and expanded the scope of items requiring licenses for Russian entities on the MEU List.

These measures were reportedly coordinated with allied partners who will align their export control policies and requirements with those of the United States.

BIS added a new section (746.8) to the Embargoes and Special Controls Part of the Export Administration Regulations (EAR) to implement the additional export control measures.  The new section establishes a license requirement to export, re-export, and transfer in-country all items listed under Categories 3-9 of the CCL.  Many such items previously could be exported to Russia without a license.  Notably, licenses are now required for approximately 58 different categories of commercial items, including microelectronics, telecommunications equipment, sensors, navigation equipment, avionics, marine equipment, and aircraft components.

The new rule adds two new provisions to capture foreign-produced items under the EAR and requires licenses if such items are made using U.S.-origin technology or software or made by a plant that is the direct result of U.S. technology—the Russia FDP rule applies to all of Russia, and the Russia-Military End User (Russia-MEU) FDP rule targets military end-users.

Russia FDP Rule.  The FDP rule as applied to Russia is more expansive by including almost all technology and software on the CCL and defining the destination scope to include “knowledge” that the FDP is destined to Russia or will be incorporated or used in the production or development of any non-EAR99 item and produced in or destined to Russia.

Russia-MEU FDP Rule.  The section also creates the Russia-MEU FDP rule that extends beyond the traditional MEU rule application by including certain EAR99 items in the licensing requirement.  In other words, the rule expands the scope of controls for Russian entities listed in the MEU List by requiring licenses for all items subject to the EAR rather than a set of anti-terrorism controlled items applied to non-Russian entities.

The new rule also moves 45 entities from the MEU list to the EL, thus subjecting them to the Russia-MEU FDP licensing requirements.  This includes the Russian Ministry of Defence, including the Armed Forces of Russia, wherever located.  BIS stated it might add new Russian entities to the EL, subjecting them to the same Russia-MEU FDP license requirement.

Exports, re-exports, and transfers to certain “partner countries” that are adopting or have expressed an intent to adopt substantially similar measures against Russia are excluded from the new Russia FDP and Russia-MEU FDP rules.

Policy of Denial on License Applications.  BIS will now review license applications to export, re-export, or transfer in-country items under a policy of denial.  Certain categories of items, such as items related to flight safety, maritime safety, or humanitarian assistance would be reviewed on a case-by-case basis with an eye toward whether they benefit the Russian government or the defense sector.  In addition, the use of certain license exceptions has been limited.

The Bass, Berry & Sims international trade team is actively monitoring the situation in Russia and Ukraine and providing real-time advice to clients on managing the situation.